A Tough Choice For India’s Affluent Parents

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Good morning. In India, going abroad to study is considered prestigious. Not only do India’s affluent parents plan this for their children, middle-class parents too aspire to send their kids abroad. Some go to great lengths and take hefty loans. With countries like Australia and Canada changing rules for allowing foreign students, Indian affluent parents must rethink their children’s future. Read on to know more. 

In other news, companies that manufacture consumer durables are doing well in the markets. Meanwhile, you could soon see millet buns in McDonald’s outlets

THE TAKE

India’s Affluent Parents Have Hard Choices To Make About Their Child’s Education

It was inevitable — both Canada and Australia have started tightening immigration inflows, particularly for students. Australia has said it will cap the number of new international students at 2.7 lakh for calendar 2025, the lowest in five years and down from 5.6 Lakh in 2023. Canada is making restrictions across the board — for students and foreign workers. 

There are several reasons why certain countries are introducing these restrictions. A major one is the pressure international students put on infrastructure, including housing which is limited. Second is the evident misuse and abuse of the system, leading to distortions in the labour market as well. The third and foremost reason is the pushback against rising immigration in many countries. It has become an increasingly sensitive voter issue in many countries including the United States. Moving to the US is likely going to be tougher whether Donald Trump or Kamala Harris becomes president. 

These reversals will cause a blowback, particularly for India’s affluent class. The study overseas industry has boomed like never before. For example, non-banking financial companies (NBFCs), have seen the education loan business grow 80% and 70% each year in the last two years. This year, education loans with NBFCs alone will grow another 40% to cross Rs 60,000 crore, most of which is for overseas education.

Crisil Ratings says formal loans are only a small part of the funds mobilised, so families are obviously mobilising funds from elsewhere. Interestingly, loan givers are themselves pulling back right now, for example in the case of loans for Canada-bound university applications.

Despite the hurdles being many, paying presumptive taxes to the Indian government on money remitted overseas, the attraction to study abroad hasn’t reduced. Families continue to scrounge around to send their children for undergraduate study, where the chances of staying on are quite low.

Many parents, both well-earning professionals as well as self-employed or those who run small or smaller businesses would like their children to leave the country and ideally return only for family reunions. As options overseas shrink and opportunities in India stay roughly the same, it’s possible tens of thousands of potential students will not make it to universities in Canada, Australia, England or the United States in coming years. This will be the case, particularly for the affluent class which has bet on mobility for the next generation and the promise of a better first-world life, different from what they have lived. Stomaching this disappointment will be tough for all, even though a lot of money will be saved.

India’s economy continues to grow and can surely absorb talent, whether in humanities or technology. But the domestic job market is facing its own stresses. The latest placement data from the top universities and colleges like Indian Institutes of Technology(IIT)-Bombay and  Indian Institutes of Management-(IIM)Ahmedabad suggests that median salaries are falling quite sharply. For IIM Ahmedabad’s one-year MBA programme, maximum earning potential (MEP) has dropped to a six-year low after having risen in the previous year. Some IIT Bombay students are settling for offers of around Rs 4 Lakh a year, the same as a media job or less sought-after industries. If this is the condition of the top colleges, it will be tougher down the line, or compromises will be higher.

On the demand side, information technology companies are shrinking at this point and while corporate India is hiring, the rate is slow. While the lure of entrepreneurship will stay, it is not the same as it was a few years ago when Silicon Valley venture funds opened the sluice gates and the most brainless ideas were supposed to reflect hidden genius.

Then there are the horror stories. Some 46,000 postgraduates and graduates applied for contractual sanitation worker roles in Haryana, the state has revealed. This job will pay around Rs 15,000 a month. The total 3.95 lakh applicants who applied apparently know what they would be getting into. Hindustan Times quoted a 29-year-old applicant, Rachana Devi from Sirsa, as saying that the scarcity of jobs led her to apply for the position. Despite holding a degree in nursery teacher training and currently pursuing a master’s degree in history, she has been unemployed for four years. Several applicants hold BEd degrees and are studying for their masters in different disciplines. 

India’s incoming, educated workforce has to make some tough choices.  First is to accept that going overseas will get tougher and they may have to make their way around the Indian job market. Second, they will have to work harder to align with the job market, maybe sacrifice a little on perception and bury the ego to get good experience, maybe even settle for free internships to do so. Many smart young girls and boys are already doing that and they don’t need us to tell them. Hopefully, their staying back will lead to a better quality of life for all of us.

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CO:RELATION

Durables Seeing Renewed Interest 

Rural and urban consumption drives India’s growth with each product basket moving based on seasonality. Companies that make consumer durables like air-conditioners, washing machines and refrigerators are witnessing a renewed interest in the stock market. Usually, the second quarter of the financial year is not considered a ‘high demand’ month. Yet, share prices of companies like Voltas, Whirlpool and others have been outperforming the broader market and the consumption basket lately. 

The surge in the demand for air-conditioning units due to extreme weather conditions is unprecedented. Voltas grew revenue and operating profits at an above 50% rate for the June 2024 quarter in the air-conditioning segment. There is also a tailwind to the durables story. Prices of key inputs like copper, aluminium and plastic have declined or remained stable. That has allowed these companies not to raise the prices of products and meet the rising demand. Analysts anticipate a robust festive season demand that should allow consumer durables companies to do even better.

CORE NUMBER

$9.9 billion

This is how much the Indian Premier League’s (IPL) business enterprise value declined to in 2024, according to a report by valuation company D&P Advisory. The value dropped by 11.7% on-year, a significant decline in valuation since the league’s inception. The decline is mainly due to a reassessment of media rights values after changes in the media industry. Reduced competition in the next IPL media rights auction could further affect valuation growth. 

FROM THE PERIPHERY

—🥙 Mcdonald’s outlets in West and South India, run by Westlife Foodworld, will soon offer multi-millet buns. This bun was co-created by the QSR chain and CSIR-Central Food Technological Research Institute (CFTRI), functioning under the Ministry of Science & Technology. The five millets - Bajra, Ragi, Jowar, Proso, and Kodo will be directly sourced from 5,000 farmers across 7 states. Customers will be charged a premium of Rs 10 for the multi-millet bun. 

—🛍️ Festive season is around the corner and offline retailers are worried. E-commerce platforms are expected to offer heavy discounts and promotional offers. The competition is especially fierce in segments like smartphones and consumer electronics. Associations of offline retailers have written to companies asking for parity in prices, cashbacks and EMI schemes across channels. The festive season is crucial for brands too and accounts for up to 30% of their annual sales.

—🌽 India's push for more corn-based ethanol has flipped it from Asia's top corn exporter to a net importer for the first time in decades, squeezing local poultry producers and shaking global supply chains. After India hiked ethanol procurement prices in January, corn imports surged, dropping exports from 2-4 million to just 450,000 tonnes in 2024. Imports are expected to hit a record 1 million tonnes, mainly from Myanmar and Ukraine. This shift, driven by India's ethanol ambitions, is poised to boost global prices while squeezing traditional export markets like Vietnam and Bangladesh. 

—🚘 FAME 3 on the way? Minister of Heavy Industries HD Kumaraswamy said on Wednesday that the third edition of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme will be ready in the next one or two months. The minister had also stated last month that the scheme was in its final stages. It will replace the temporary Electric Mobility Promotion Scheme (EMPS), which is set to expire in September. FAME 3 is expected to focus more on public transport electrification as well as charging infrastructure.

UGH

Climate change has many impacts, one of them being the melting glaciers of the Himalayas. While these would directly impact the lives of people living in the mountainous terrain, now research is also warning of frozen ancient viruses making a return after thousands of years. A study published in the scientific journal Nature Geoscience said researchers found 1,700 such viruses in the ice cores of the Guliya Glacier in the Tibetan Plateau. Scientists have been warning of “zombie viruses” from melting Arctic permafrost for a few years now. These could cause pandemics too. In fact, in 2016 a remote corner of Russian Siberia saw an anthrax outbreak in reindeer thought to have originated from melted permafrost.

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